The Bank of England's team has a reputation for precise and rather clever calculations. On November 7th, the regulator made the expected move to reduce the interest rate by 25 basis points. This decision went ahead despite the Labour Party's ambitious budget package casting doubts over further monetary easing.
As a result, the lending rate dropped from 5% to 4.75%. Now, market players are glued to comments from Bank of England Governor Andrew Bailey. Traders and investors are eager to hear current forecasts for the UK economy in light of the budget measures and the US presidential election.
When it comes to the rate cut, things went as well as could be hoped. Financial markets had already priced in a 97% chance of a 0.25% cut, which was confirmed at the BoE's November meeting. Analysts had cautioned, however, that further cuts might be delayed due to the government's budget, which calls for tax hikes and increased spending.
The pound sterling responded to the regulator's decision with a confident surge. The pound/dollar pair made an abrupt reversal near the 1.2900 mark and later climbed by 0.4%, reaching 1.2930. Experts say this is likely just the beginning, and the pound sterling has more surprises in store.
